Rising global wheat prices could cost the government an additional EGP 15 bn this fiscal year, Finance Minister Mohamed Maait told Bloomberg Asharq (watch, runtime: 1:35).
In addition, Ministry of Supply and Internal Trade assumed an average price of USD 255 per ton in this year’s budget but the state is now paying USD 350, Supply Minister Ali Moselhy said last week.
Wheat prices have surged to new heights since the end of February when Russia invaded Ukraine: Russia and Ukraine supply around a quarter of the world’s wheat but the conflict has all but removed their production from the global market.
The two countries accounted for 86% of Egypt’s imports in 2020. Egypt is the world’s largest importer of wheat and last year purchased 11.6 mn tons, 4.7 mn of which were bought by state grains buyer GASC.
Prices were a problem even before the war in Ukraine broke out, with Maait saying last month that the recent rise in global wheat prices would cost us an additional EGP 12 bn this year. UN figures released Saturday showed that global food prices hit record highs in February, before Russia launched military action at the end of the month.
The global grain market is messy right now: GASC has canceled two tenders since the beginning of the war due to high prices and a lack of bids while another two cargoes are currently stuck in Ukraine. Egypt’s 4.5-month stockpile and a bigger domestic harvest mean there are no imminent shortages on the horizon, and Egypt has signaled it may relax requirements as it looks at other potential suppliers including the US, Romania and Kazakhstan. And Ukraine is now saying that it could start shipping grain by rail to Romania, Poland, Hungary and Slovakia.
Expect talk of bread subsidies to increase: The Finance Ministry allocated almost EGP 50 bn to bread subsidies in FY 2021-2022 but with prices having risen 37% above budgeted forecasts the government is facing a sizable increase to its subsidy spend. President Abdel Fattah El Sisi first mentioned the possibility of a subsidy taper last year, and the Supply Ministry is expected to announce a plan by the end of March.
